Modern Monetary Policy and Central Bank Governance: A Story of Two Tales

10 Pages Posted: 29 Aug 2014

See all articles by Sylvester C. W. Eijffinger

Sylvester C. W. Eijffinger

Tilburg University (CentER) - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR)

Donato Masciandaro

Bocconi University - Department of Economics (ECO); Bocconi University - Department of Economics

Date Written: August 2014

Abstract

The objective of this note is to present the evolution of both the economics and the political economy of monetary policy in the last three decades – first the Great Moderation and then the Financial Crisis – as a story of two intertwined tales: on the one side the tale of how to govern money and interest rates in the short run; on the other side the tale of how to design in a longer horizon the monetary architectures. In the tradition the two tales are told separately, where the academic scholars preferred to focus essentially on the first perspective while only the central bankers and partially the policymakers were also sensible to the engineering of the monetary settings. The big innovation in the modern monetary policy was the progressive merger of the analysis of the macroeconomic effects of the public choices in the monetary games played day by day (monetary policy) with the study of the structural features that characterized both the monetary players – governments and central bankers – as well as the rules and institutions of the monetary games that shape goals and incentives of the players (central bankers and other economic agents).

Suggested Citation

Eijffinger, Sylvester C. W. and Masciandaro, Donato and Masciandaro, Donato, Modern Monetary Policy and Central Bank Governance: A Story of Two Tales (August 2014). Baffi Center Research Paper No. 2014-157, Available at SSRN: https://ssrn.com/abstract=2488451 or http://dx.doi.org/10.2139/ssrn.2488451

Sylvester C. W. Eijffinger

Tilburg University (CentER) - Department of Economics ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands
+31 13 466 2411 (Phone)
+31 13 466 3042 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Donato Masciandaro (Contact Author)

Bocconi University - Department of Economics (ECO) ( email )

Via G. Roentgen 1 - 5E211
20136 Milan
Italy

Bocconi University - Department of Economics ( email )

Via G. Roentgen 1 - 5E211
20136 Milan
Italy

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